On February 18, 2014, SFIG filed a letter with the Securities and Exchange Commission (SEC) recommending revisions to the Loan-Level disclosure schedule proposed under Regulation AB II. The RMBS Committee’s Loan-Level Disclosure Subcommittee held a series of meetings from late 2013 through January 2014 to discuss improvements to Schedule L with the goal of proposing enhancements that could be adopted by the SEC in the final rule. Also considered was the addition of certain new fields which it was believed by subcommittee members would enhance the disclosures proposed in Schedule L. Submission of this letter demonstrates the ability of SFIG’s members to achieve consensus from many constituencies on a key issue impacting the return of private capital to the mortgage market.

We anticipate that the SEC will release the final rule in the near future and SFIG looks forward to engaging with our membership on the impact of the final rule across asset classes. If you would like to receive a copy of the letter, please contact Alyssa.Acevedo@sfindustry.org.

SFIG TO MEET WITH REGULATORS TO DISCUSS PARTICIPATIONS AS A RISK RETENTION OPTION

SFIG is scheduled to meet with regulators from the Federal Reserve Board (Federal Reserve), Federal Deposit Insurance Corporation (FDIC), Securities and Exchange Commission (SEC) and Office of the Comptroller of the Currency (OCC) on Thursday, February 20, 2014 at 2:00 p.m. EST in order to discuss the use of participations as a risk retention option. SFIG members and staff will walk through the participations discussion included in the SFIG comment letter and take any questions from the regulators. Please contact Sairah.Burki@sfindustry.org or Alyssa.Acevedo@sfindustry.org with any questions.

SENATE BANKING STAFF DISCUSSES PRIORITIES WITH SFIG

This week, SFIG staff met with the staffs for both Senator Corker (R-TN) and the Senate Banking, Housing and Urban Affairs Committee (Committee) to discuss their priorities for the remainder of the year. Highest on the priority list for both was Housing Finance Reform. The following issues are also priorities for the Committee and important to SFIG membership:

Dodd-Frank Implementation,

Reauthorization or Improvement of the Terrorism Risk Insurance Act,

Reauthorization or Improvement of the Export-Import Bank, and

Promoting Economic Growth and Access to Capital for Both Rural American and Native Americans.

SFIG expects Housing Finance Reform to continue to take center stage for the Committee during 2014. SFIG will also continue to ensure that any legislation proposed by the Committee will help create a liquid and transparent securitization marketplace. For more information, please contact Michael.Flood@sfindustry.org.

SFIG MOVING FORWARD ON CREATION OF NSFR WORKING GROUP

In response to the Basel Committee’s January 12, 2014 release of proposed revisions to the Net Stable Funding Ratio (NSFR), SFIG is moving forward with the creation of a working group to draft a comment letter.The proposed NSFR amendments are intended to develop a clearer framework to promote stability in banks’ long-term liquidity funding. The current proposed amendments follow the 2009 release of the initial NSFR proposal. Comments are due by April 11, 2014.

The working group will be formed through the Regulatory Capital and Liquidity Committee and will begin meeting next week. For more information, or to participate in the comment letter process, please contact Mary.Robinson@sfindustry.org.

WEDNESDAY, May 14, 2014Time and Agenda to be announced.Société Générale245 Park Avenue, New York, NY

ADVOCACY OUTLOOK

If you would like to participate in the work SFIG is undertaking through our committees as highlighted below, please e-mail Committees@sfindustry.org. For specific inquiries on any of SFIGs advocacy efforts please contact the staff member listed for the related project.

Project RMBS 3.0, developed in order to help restore private capital back into the market by providing effective recommendation on issues related to Representations and Warranties,will begin conference calls to develop agenda items within the coming weeks. The project is organized into three subcommittees: 1) Representations, Warranties and Repurchase Enforcement; 2) Due Diligence/Loan Review, Data and Disclosure; and 3) Role of Trustees and Bondholder Communications. Please contact Mary.Robinson@sfindustry.org for additional information on Project RMBS 3.0.

SFIG’s GSE Reform Subcommittee continues its work on formulating a comprehensive policy recommendation that will form the basis for SFIG’s position as Congress moves forward with Housing Finance Reform. Last week, the RMBS Full Committee adopted official positions on the common securitization platform and guarantors and intends to formalize its views on the TBA Market and co-operative’s this week. As we continue to work on these issues, SFIG will engage Members of Congress to ensure its policy recommendations are considered in both the House and Senate. If you would like to learn more about SFIG’s emerging views on GSE Reform, please contact Amanda.Bateman@sfindustry.org.

SFIG’s Mortgage Loan-Level Disclosure Subcommittee has reviewed and developed additional data elements for potential disclosure. SFIG will use this work as a basis of discussions and correspondence with the Securities and Exchange Commission (SEC) on the mortgage aspects of Regulation AB II. SFIG has also recently submitted a letter to the SEC regarding mortgage Loan-Level disclosure. Please contact Alyssa.Acevedo@sfindustry.org for additional information on SFIG’s work on this topic.

SFIG is working with the Global Financial Markets Association (GFMA), Institute for International Finance (IIF), and Commercial Real Estate Finance Council (CREFC) on a response to Basel’s Second Consultative Document, Revisions to the Securitization Framework. Conference calls are being held weekly with GFMA, IIF and CREFC. SFIG’s work on this project is being undertaken through the Regulatory Capital and Liquidity Committee. Please contact Amanda.Bateman@sfindustry.org for additional information.

SFIG is continuing to engage with regulators and legislators on our concerns regarding the Liquidity Coverage Ratioproposal. Please contact Alyssa.Acevedo@sfindustry.org with your questions or comments.

The Volcker Task Force is working with the asset class committees to determine key issues and need for interpretative guidance regarding the Volcker Rule. Please contact Amanda.Bateman@sfindustry.org for additional information on the Volcker Task Force.

The Regulatory Capital and Liquidity Committee will begin meeting to develop a comment letter on Basel’s Net Stable Funding Ratio proposal. If you would like to participate in the NSFR Working Group, please email Mary.Robinson@sfindustry.org.

The Risk Retention Committee is continuing to follow up with regulators on risk retention questions across asset classes. Please email Alyssa.Acevedo@sfindustry.org with any questions.

SFIG is continuing to build membership of its Chinese Market Committee among its members. If you would like more information on SFIG’s work with respect to Chinese securitization, please contact Alyssa.Acevedo@sfindustry.org.

SFIG has launched its initiative to provide critically needed input for the Financial Stability Board’s “Shadow Banking” project. For more information on SFIG’s work on Shadow Banking, please contact Amanda.Bateman@sfindustry.org.

Amendments to Regulation YY (12 CFR part 252) were recently adopted by the Federal Reserve Board (Fed) to ensure the enhancement of prudential standards established under section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act for bank holding companies and foreign banking organizations. Specifically, the amendments focus on companies and organizations with total consolidated assets of $50 billion or more. The enhanced prudential standards include “risk-based and leverage capital requirements, liquidity standards, requirements for overall risk management (including establishing a risk committee), stress-test requirements, and a 15-to-1 debt-to-equity limit for companies that the Financial Stability Oversight Council (Council) has determined pose a grave threat to financial stability. The amendments also establish risk-committee requirements and capital stress-testing requirements for certain bank holding companies (BHCs) and foreign banking organizations (FBOs) with total consolidated assets of $10 billion or more. The rule does not impose enhanced prudential standards on nonbank financial companies designated by the Council for supervision by the Board. U.S. top-tier BHCs will be subject to the final rule’s requirements beginning on January 1, 2015; FBOs will be subject to the final rule’s requirements beginning on July 1, 2016.

At an event held on Wednesday, February 12, 2014, Shaun Donovan, Secretary of Housing and Urban Development (HUD), stated that the use of eminent domain to seize “underwater” mortgage loans was something which “needs to be decided by the courts.” Donovan stated that two “high bars” should govern court decisions: whether or not it is “legal”, and if these local municipalities offering a “fair price” for the mortgage loans. He reiterated that these two items should, in fact, be “high bars”. Mortgage and housing industry groups have asked HUD to rule that Federal Housing Administration-insured loans will not be used to refinance mortgage loans on properties that are condemned and seized by local government under eminent domain.

SFIG has consistently taken the view that the use of eminent domain to seize any “underwater” mortgage loans negatively impacts the return of private capital to the mortgage market. SFIG filed an amicus curiae brief in support of Wells Fargo’s motion for a preliminary injunction against the city of Richmond, California and Mortgage Resolution Partners LLC in August 2013.

On February 12, 2014, 17 Democratic members of the House Committee on Financial Services wrote to the regulatory agencies implementing the Volcker Rule to express their support for interpretive guidance on the definition of “ownership interest”. Specifically, the members who signed the letter asked that such guidance be consistent with Congressional intent and recognize that “traditional creditor-protective voting rights should not, by themselves, cause senior debt securities of collateralized loan obligations (CLO) to be treated as equity interests.”

While the members, including Committee Ranking Member Maxine Waters (D-CA), reiterated their support for the rule generally, they also pointed out that the ability to remove an investment manager does not necessarily trigger an “ownership interest”. They highlighted the right to vote to remove an investment manager “for cause,” such as a material breach of contract, fraud, and criminal activity that is typically included with respect to senior debt securities issued by CLOs.

In addition to questioning what qualifies as an ownership interest, the letter also stressed that any guidance issued should provide clarification on how existing senior CLO debt securities will be handled.

For its part, SFIG will continue to work with regulators and Members of Congress to find a solution for legacy CLOs that creates both a liquid and well-regulated marketplace.

FANNIE MAE OFFERS CLOSING COST ASSISTANCE IN ORDER TO MOVE REO

Fannie Mae is offering an incentive of up to 3.5 percent for consumers who purchase foreclosed homes through its HomePath program. In its third-quarter financial filing, Fannie reported that its inventory of real estate owned increased to nearly 101,000 single-family properties from roughly 97,000 at the end of the second quarter. The deal requires owner-occupant buyers to request the closing cost assistance at the time of their initial offer during the First Look period, typically 20 days. According to the Terms and Conditions, all actively listed properties in 27 states are eligible for offers submitted on or after February 14, 2014 and no later than March 31, 2014. Additional details can be found in the announcement of the offer.

On February 12, 2014, the U.S. Chamber of Commerce (Chamber) submitted a letter to the Consumer Finance Protection Bureau (CFPB) that cited concern regarding a lack of clear standards in the auto lending industry. After issuing a warning against potential discrimination in auto-lending, the CFPB has refrained from taking any action to introduce new rules or regulations for the industry. The Chamber of Commerce letter states the Chamber’s belief that “if the Bureau identifies areas in which it wants to fundamentally alter the rules, it should take the time to write new standards rather than rely on one-off enforcement and press release ‘warnings’ to other regulated companies” (emphasis original). The Chamber is seeking a formal rulemaking process from the CFPB on auto-lending standards.

The Chamber’s full letter and other information is available on their website.

EUROPEAN COMMISSION MIGHT ALLOW BANKS TO USE MORE SECURITIZATIONS IN LIQUIDITY BUFFERS

The European Commission (EC) recently said that it would potentially permit banks to use more securitizations in their liquidity buffers. The EC appears willing to disregard a report it commissioned earlier. When the European Banking Authority reviewed liquid assets for the EC late last year, it reported some RMBS were liquid, but put most securitizations in the lowest possible liquidity category. The EC is reportedly willing to consider more ABS and RMBS as liquid when setting high quality assets standards in the Liquidity Coverage Ratio.

ABA DROPS SUIT AGAINST VOLCKER RULE IN LIGHT OF RECENT MODIFICATIONS

On February 12, 2014, the American Bankers Association (ABA) announced that it would drop its lawsuit against portions of the Volcker Rule modified by the interim final rule released on January 14, 2014. The ABA initiated the suit in December 2013 in response to portions of the Volcker Rule dealing with collateralized debt obligations (CDOs) backed by trust preferred securities. The ABA argued that the original terms of the Volcker Rule would have caused financial harm to smaller community banking institutions. After the release of the interim final rule, which allows banks to hold CDOs backed by trust preferred securities under certain conditions, the ABA stated that the impact of the final rule removed the compliance cost and burdens sufficiently to dismiss their lawsuit.

In a February 12, 2014 letter submitted to Federal Reserve Chair Janet Yellen, Senator Elizabeth Warren (D-MA) and Representative Elijah Cummings (D-MD) asked that the Federal Reserve “revisit its existing delegation rules and require that the board retain greater authority over the Federal Reserve’s enforcement and supervisory activities in the future.” The letter calls attention to the fact that the Federal Reserve has only voted on 11 of approximately 1,000 formal enforcement decisions. The Democratic lawmakers’ letter requests that a formal vote from the Federal Reserve Board occur before any enforcement actions involving $1 million or more, the removal of a bank officer, or the installment of new management occur.

HARP REFINANCES REACH 3 MILLION

Federal Housing Finance Agency (FHFA) recently announced that more than 3 million homeowners have taken advantage of the Home Affordable Refinance Program (HARP). HARP is a program that allows “underwater” borrowers to refinance their mortgage loans even if their loan-to-value ratio on the original mortgage exceeds 125 percent, as well as allowing for a more streamlined refinance process. HARP is limited to mortgage loans that Fannie Mae and Freddie Mac already own.

For more information about the details of this program please consult www.HARP.gov.

NEXT WEEK IN WASHINGTON

SEC SPEAKS 2014

Congress stands in recess for a constituent work week until it reconvenes Monday, February 24, 2014. There will be no hearings until Congress returns on Monday.

SFIG has a number of Committees and Task Forces meeting and working on many topics of interest to the securitization industry. Please email us for more information, including how to join.

SFIG is pleased to share this edition of its newsletter with our members, as well as our supporters in the structured finance community. To ensure that you receive future editions of the newsletter, please visit our website or email us to learn more about membership opportunities.